Consumer Price Indices Briefing Notes - March 2016

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  • BRIEFING NOTE

    Consumer Price Inflation March 2016

    Coverage: UK Date: 12 April 2016 Geographical Area: UK Theme: Economy

    CONTENTS

    SUMMARY 2 CPI SUMMARY 5 CPI NOTABLE MOVEMENTS 7 CPI DETAILED BRIEFING 8 RPI SUMMARY 25 RPI NOTABLE MOVEMENTS 26 RPI DETAILED BRIEFING 27 RECONCILIATION OF CPI AND RPI 35 RPI MISCELLANEOUS DATA 36 OUTLOOK 37

    This note is produced as background briefing for the Consumer Price Inflation Statistical

    Bulletin. Users who require authoritative figures should use the Consumer Price Inflation

    Statistical Bulletin or Consumer Price Inflation Dataset.

    1

  • Statistical Bulletin: Briefing Note, Consumer Price Inflation March 2016: Page 2

    SUMMARY Consumer Prices Index (CPI) The CPI is a measure of consumer price inflation produced to international standards and in line

    with European regulations. First published in 1997 as the Harmonised Index of Consumer Prices

    (HICP), the CPI is the inflation measure used in the Governments target for inflation.

    The CPI is also used for purposes such as uprating pensions, wages and benefits and can aid in

    the understanding of inflation on family budgets. For more information see Users and uses of

    consumer price inflation statistics (2013).

    The main movements for CPI in March 2016 are:

    The all items CPI is 100.2, up from 99.8 in February.

    The all items CPI annual rate is 0.5%, up from 0.3% in February.

    The annual rate for CPI excluding indirect taxes, CPIY, is 0.4%, up from 0.2% last month.

    The annual rate for CPI at constant tax rates, CPI-CT, is 0.4%, up from 0.2% last month.

    The CPI all goods index is 98.8, up from 98.6 in February.

    The CPI all goods index annual rate is -1.6%, unchanged from last month.

    The CPI all services index is 101.7, up from 101.1 in February.

    The CPI all services index annual rate is 2.8%, up from 2.4% last month.

    CPIH CPIH has been re-assessed to evaluate the extent to which it meets the professional standards set

    out in the Code of Practice for Official Statistics and the assessment report published on 3 March

    2016. The report includes a number of requirements that need to be implemented for CPIH to

    regain its status as a National Statistic. The actions taken to address these requirements will be

    reported to the UK Statistics Authority by September 2016.

    CPIH is a measure of UK consumer price inflation that includes owner occupiers housing costs

    (OOH). These are the costs of housing services associated with owning, maintaining and living in

    ones own home. OOH does not include costs such as utility bills, minor repairs and maintenance

    which are already included in the index.

    CPIH uses an approach called rental equivalence to measure OOH. Rental equivalence uses the

    rent paid for an equivalent house as a proxy for the costs faced by an owner occupier. In other

    words this answers the question how much would I have to pay in rent to live in a home like

    mine? for an owner occupier. OOH does not seek to capture increases in house prices. Although

    this may be inconsistent with some users expectations of measures of OOH, the inclusion of an

    2

    http://webarchive.nationalarchives.gov.uk/20160105160709/http:/www.ons.gov.uk/ons/guide-method/user-guidance/prices/cpi-and-rpi/index.htmlhttp://webarchive.nationalarchives.gov.uk/20160105160709/http:/www.ons.gov.uk/ons/guide-method/user-guidance/prices/cpi-and-rpi/index.htmlhttps://www.statisticsauthority.gov.uk/publication/statistics-on-consumer-price-inflation-including-owner-occupiers-housing-costs/

  • Statistical Bulletin: Briefing Note, Consumer Price Inflation March 2016: Page 3

    asset price and therefore capital gains would make the index less suitable for a measure of

    consumption. OOH currently accounts for 16.5% of the expenditure weight of CPIH. This compares

    with a weight of 19.5% in 2005.

    Currently, the method of calculation, the population coverage and the basket of goods and services

    are the same as the Consumer Prices Index (CPI), with the exception of OOH. The method of

    deriving the weights for CPIH and the data used for these are also the same as for CPI, with the

    exception of OOH. This can result in some differences from the CPI.

    The main movements for CPIH in March 2016 are:

    The all items CPIH is 100.4, up from 100.1 in February.

    The all items CPIH annual rate is 0.7%, up from 0.6% in February.

    The annual rate for CPIH excluding indirect taxes, CPIHY, is 0.8%, up from 0.6% last month.

    The OOH component of CPIH is 101.5, up from 101.3 in February.

    The OOH component annual rate is 2.1%, up from 2.0% last month.

    The CPIH all goods index is 98.8, up from 98.7 in February.

    The CPIH all goods index annual rate is -1.6%, unchanged from last month.

    The CPIH all services index is 101.6, up from 101.1 in February.

    The CPIH all services index annual rate is 2.6%, up from 2.2% last month.

    Retail Prices Index (RPI) and RPIJ In accordance with the Statistics and Registration Service Act 2007, the Retail Prices Index and its derivatives have been assessed against the Code of Practice for Official Statistics and found not to meet the required standard for designation as National Statistics. The full assessment report can be found on the UK Statistics Authority website. The RPI is a long-standing measure of UK inflation that has historically been used for a wide range

    of purposes such as the indexation of pensions, rents and index-linked gilts. For further information

    see Users and uses of consumer price inflation statistics (2013).

    RPIJ is an improved variant of the Retail Prices Index which is calculated using formulae that meet

    international standards. The rationale for creating RPIJ was to give users a better alternative to the

    RPI if their needs were for a measure of inflation based on the same population, classifications,

    weights, etc. as the RPI. Currently, RPIJ also acts as an analytical series, in that it allows users to

    see the impact of using the Jevons (which meets international standards) in place of the Carli

    formula (which does not meet international standards) in the RPI. The use of the different formulae

    at the elementary aggregate level is currently the only difference between these indices. Detailed

    goods and services indices for RPIJ are not produced.

    3

    http://www.statisticsauthority.gov.uk/assessment/assessment/assessment-reports/assessment-report-246---the-retail-prices-index.pdfhttp://www.statisticsauthority.gov.uk/assessment/assessment/assessment-reports/assessment-report-246---the-retail-prices-index.pdfhttp://webarchive.nationalarchives.gov.uk/20160105160709/http:/www.ons.gov.uk/ons/guide-method/user-guidance/prices/cpi-and-rpi/index.html

  • Statistical Bulletin: Briefing Note, Consumer Price Inflation March 2016: Page 4

    The main movements for RPI and RPIJ in March 2016 are:

    The all items RPI is 261.1, up from 260.0 in February.

    The all items RPI annual rate is 1.6%, up from 1.3% last month.

    The all items RPIJ is 239.4, up from 238.7 in February.

    The all items RPIJ annual rate is 0.8%, up from 0.6% last month.

    The annual rate for RPIX, the all items RPI excluding mortgage interest payments (MIPs)

    index, is 1.6%, up from 1.4% last month.

    The all goods RPI is 197.8, up from 197.0 in February.

    The all goods RPI annual rate is -0.6%, down from -0.5% last month.

    The all services RPI is 357.2, up from 355.5 in February.

    The all services RPI annual rate is 2.9%, up from 2.4% last month.

    The annual rate for RPIY, the all items RPI excluding MIPs and indirect taxes index, is 1.7%,

    up from 1.4% last month.

    The Tax and Price Index (TPI) for March is 228.0, up from 226.9 in February.

    The TPI annual rate is 1.1%, up from 0.8% last month.

    4

  • Statistical Bulletin: Briefing Note, Consumer Price Inflation March 2016: Page 5

    CPI SUMMARY CONTRIBUTIONS TO CHANGE IN THE CPI ANNUAL RATE

    CPI COICOP DIVISIONS Weight Weight 1 month 1 month Contribution

    2015 2016 % change % change to CPI annual

    Mar 2015 Mar 2016 rate change

    01: Food and non-alcoholic beverages 110 103 -0.2 -0.6 -0.05

    02: Alcoholic beverages and tobacco 43 42 -0.1 -0.3 -0.01

    03: Clothing and footwear 70 71 -0.1 1.0 0.08

    04: Housing, water, electricity, gas and other fuels 128 120 -0.4 -0.2 0.02

    05: Furniture, household equipment and maintenance 59 59 0.4 0.7 0.02

    06: Health 25 28 0.4 0.2 -0.01

    07: Transport 149 153 0.7 1.7 0.14

    08: Communication 31 32 0.2 -0.4 -0.02

    09: Recreation and culture 147 148 0.4 0.3 -0.01

    10: Education 26 25 - - -

    11: Restaurants and hotels 121 123 0.2 0.5 0.04

    12: Miscellaneous goods and services 91 96 0.2 - -0.02

    Large upward effects came from:

    Transport, where prices overall rose by 1.7% between February and March this year compared with a rise of 0.7% between the same 2 months a year ago. By far the largest

    upward effect came from air transport where the timing of Easter contributed to fares rising

    by 22.9% between February and March 2016. Fares rose by 2.7% between the same 2

    months in 2015. There was also a smaller upward effect from rail passenger transport with

    fares rising this year but falling a year ago. These upward effects were partially offset by a

    downward contribution from motor fuels with petrol prices rising by 0.9 pence per litre